shares of Camping World Holdings (CWH -4.22%), the recreational vehicle (RV) retailer, has had a rough start to 2022, down 37% year-to-date. Investors worry that higher gas prices will dampen demand for RVs. There is also concern that consumers are less likely to make a major purchase like an RV because of concerns about rising inflation.
However, those fears appear to have already been priced into the stock. Shares look very cheap, trading at just five times what the company is projected to earn over the next year. Additionally, sales so far seem to be holding up despite the macro concerns, as the company posted record first-quarter revenue of $1.7 billion in 2022. Best of all, Camping World has kept its dividend payout on the gas and now has an expected yield of 8.5%.
returns to shareholders
Camping World shows a strong commitment to rewarding its shareholders and increasing its dividend payout. It had just recently raised its quarterly dividend from $0.25 to $0.50 in the second half of 2021, and in March it increased the quarterly payout to $0.625, equivalent to $2.50 annually.
CEO Marcus Lemonis seems firmly committed to the sizable dividend payout. When an analyst asked on the May 4 conference call if there was a scenario where the dividend would need to be cut, Lemonis said, “We have no plans at all to change our dividend strategy and we have been alerted to several scenarios to do so.” ensure our strategy is sustainable.”
In addition to returning capital to its shareholders through this generous dividend payment, Camping World also repurchased over 2.5 million shares for approximately $79.8 million during the first quarter of 2022. Stock buybacks are good news for investors because they reduce the number of shares on the market and increase earnings per share. They can also be taken as a sign that management believes the stock is undervalued.
More than just top-class articles
The company also generates income in many ways that go beyond the expensive purchase of new RVs. Camping World’s Good Sam Club offers insurance and roadside assistance. The stores also sell parts and offer maintenance and repair services. It is estimated that after several years of growth, the total number of existing RVs has increased by one million. This means there is a larger pool of potential consumers who will need these services.
These services also help make the company more defensive by providing it with more stable earnings during less robust parts of the cycle. On the earnings call, Lemonis acknowledged the value of bringing customers into Camping World’s system, “So we’re still trying to sell a $13,000 unit that’s paying $129, $139 a month -Dollar arrives as we try to bring new people into our ecosystem. We will never resist trying to capture that.”
Camping World also has some interesting growth drivers. The company’s recently launched peer-to-peer RV rental platform is gaining momentum. Lemonis said that both the rental dollars processed on the platform and the number of units available increased significantly from late 2021 through the end of Q1 2022.
Second, Lemonis says the company will be rolling out its “end-to-end RV buying experience” in several states this year, which will allow consumers to buy RVs online and have them delivered to their homes. That all-digital experience would include financing and home delivery, and Lemonis says it will allow Camping World to “serve customers well beyond the markets we currently serve.”
Is Camping World a purchase?
Camping World trades at an attractive valuation and has steadily increased its dividend. Its visible and outspoken CEO is very committed to this dividend payout and seems confident it’s sustainable.
The market is understandably concerned about inflation and rising gas prices, but seems to ignore the fact that Camping World’s business is more than just lumpy selling new motorhomes for big tickets and also includes ancillary services such as insurance, service and repairs, and additional catalysts such as peer to-peer rentals and the new end-to-end digital experience.
For these reasons, I see Camping World stock as a long-term buy.
Michael Byrne has no position in any of the stocks mentioned. The Motley Fool recommends Camping World Holdings and recommends the following options: short June 2022 $29 calls on Camping World Holdings. The Motley Fool has a disclosure policy.